PRESIDENT/ GROUP CEO’S MESSAGE CAPTAIN RAJALINGAM SUBRAMANIAM President/ Group Chief Executive Officer Our efforts will be supported by the enhancement of our organisational culture and behaviour through the adoption of a broader international and adaptive mindset, while we continue to invest in the reskilling and upskilling of our workforce to meet the challenges of tomorrow. INTRODUCTION DELIVERING FINANCIAL SUSTAINABILITY OUR STRATEGIC REPORT CARD FOR 2022 2022 was a year of transition. Personally, I transitioned from COO to take over as Group CEO in October. Although I am an MISC veteran, transitioning from sea to shore and through various management and leadership roles in the group, this new accountability was a humbling experience. I have been reminded in my first few months as PGCEO of how blessed we are as an organisation to have such a committed team. The energy and passion throughout our businesses is impressive. This is of course in no small part due to our former President and Group CEO, Datuk Yee Yang Chien. Datuk Yee Yang Chien spent 20 years in various leadership roles within MISC and played an important role in its development. I wish to thank him for sharing his insights and perspectives on MISC with me, as we worked together for a seamless leadership transition. As a Group, we thank him for all he has done for the organisation and wish him the very best with his future voyage. Through these multi-dimensional challenges MISC took early proactive steps to continually keep our people safe, and to comply with all emerging laws, rules and regulations. Further, MISC recorded positive progress in our strategic execution, taking the opportunity to strengthen our foundations. This was made possible because of the premium reputation and relationships we have built with our valued stakeholders, including blue-chip clients. In an uncertain and volatile environment, the strength of the MISC brand and our diversified portfolio added security to our business, while the steadfast implementation of our strategy continued to deliver sustainable financial returns. Our concerted efforts were critical in powering our resilience, as we expanded our capabilities to venture into new areas in line with our ambition to drive sustainable growth and long-term value creation. 2022 also reinforced the need to accelerate the transition to a low-carbon future, both on environmental and energy security grounds. MISC remains one of the highest rated shipping companies in the world, and we have maintained our credit ratings with Moody’s and S&P. We refuse to let short term events, no matter how unpredictable, blow us off course from our strategic path of long-term value creation through sustainable growth. To balance mitigating short-term challenges with focusing on long-term strategic objectives, MISC employs a dual-growth strategy. We drive short- to medium-term growth through our five-year rolling business plans. These focus on serving traditional markets as responsibly as possible to generate secured recurring cash flows via long term contracts with premium clients. These underpin MISC’s financial sustainability, deliver returns to our shareholders, and ensure we have the capital headroom required to fund the transition of our business and long-term strategy. Our long-term strategy is defined by MISC 2050. This is our pathway to building a new portfolio of businesses that will enable the Group to thrive in the net-zero and circular economy. We do this by investing in our brand, our people and our planet. The performance of our various businesses is detailed more fully in the Chairman’s message and business segments of this report, but in summary, in 2022 MISC delivered on the following fronts as we executed our strategy. 1. HSSE HSSE shall always remain our highest priority. In 2022 MISC’s HSSE performance was generally maintained, but we are conscious of the need to inculcate a Generative HSSE Culture as a way of life in our organisation. We will work tirelessly to achieve this. 2. Project Execution We focussed relentlessly on execution, particularly our Brazilian FPSO project, which had previously experienced challenges caused by COVID-19 and global supply chain issues. This focus is bearing fruit, and the recovery plan remains on track with delivery scheduled for 2024. Dear Valued Shareholders, A YEAR IN REVIEW 2022 was a year of mixed fortunes for MISC. As lockdowns and border restrictions eased around the world, many of MISC’s businesses were able to resume operations at pre-pandemic levels, although China’s zero-COVID strategy continued to affect some of our projects there. Some business segments leveraged firming markets while, conversely, macroeconomic factors and geopolitical tensions exacerbated supply chain disruptions and caused challenges for others. We witnessed the fundamental reassessment of economic relations and dependencies as the world became more polarised. Rising commodity prices contributed to inflationary pressures and in response, central banks worldwide raised interest rates rapidly, escalating recessionary risks. We also saw volatility in energy markets. Energy security became of prime concern to policymakers and decarbonisation took a temporary back seat as nations sought to replace lost supplies. MISC delivered robust financial returns to record improved year-on-year performance. Group revenue rose 29.9% to RM13,867.0 million in 2022 compared to RM10,671.7 million in 2021, while profit before tax (PBT) increased by 5.6% to RM1,874.3 million in 2022, as compared to PBT of RM1,774.6 million in 2021. Cash flow from operations (CFO) remains our preferred yardstick as it represents the real-world cash generation of our assets, undistorted by artificial accounting measures. The Group recorded CFO of RM3,042.1 million in 2022, which included cash payments of RM2,679.9 million for the conversion of an FPSO. Excluding the latter payment, MISC would have had CFO in 2022 of RM5,722.0 million, a 41.8% increase from 2021. MISC’s strong cash flows and consequent resilience is testament to the fundamental strength of our strategy - to create secured and recurring incomes by leasing assets on long term charters to select premium clients. Year on year, our strategy has delivered sustainable incomes that underpin MISC’s continued success and predictable future cash flows, enabling MISC to deliver consistent dividends. Our balance sheet remains healthy with a relatively low gearing compared to industry peers. Adopting a prudent hedging strategy has insulated MISC from the impacts of rapid interest rate rises. In 2022 MISC successfully returned to the bond markets after 18 years, issuing USD1.0 billion Global Medium-Term Notes at competitive rates, and prior to 2022’s significant interest rate increases. Key Messages Key Messages 29 28 MISC Berhad Integrated Annual Report 2022
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